The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let's look at how this market volatility affected the sentiment of hedge funds towards TIM Participacoes SA (NYSE:TSU), and what that likely means for the prospects of the company and its stock.
TIM Participacoes SA (NYSE:TSU) was in 16 hedge funds' portfolios at the end of the third quarter of 2018. TSU has seen an increase in hedge fund sentiment of late. There were 13 hedge funds in our database with TSU holdings at the end of the previous quarter. Our calculations also showed that TSU isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's check out the latest hedge fund action regarding TIM Participacoes SA (NYSE:TSU).
How have hedgies been trading TIM Participacoes SA (NYSE:TSU)?
Heading into the fourth quarter of 2018, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TSU over the last 13 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Paulson & Co was the largest shareholder of TIM Participacoes SA (NYSE:TSU), with a stake worth $72.5 million reported as of the end of September. Trailing Paulson & Co was Renaissance Technologies, which amassed a stake valued at $62.6 million. GoldenTree Asset Management, AQR Capital Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Now, some big names were leading the bulls' herd. GoldenTree Asset Management, managed by Steven Tananbaum, assembled the most outsized position in TIM Participacoes SA (NYSE:TSU). GoldenTree Asset Management had $34.3 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $9.1 million position during the quarter. The other funds with brand new TSU positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Matthew Tewksbury's Stevens Capital Management, and Thomas Bailard's Bailard Inc.
Let's also examine hedge fund activity in other stocks similar to TIM Participacoes SA (NYSE:TSU). We will take a look at Tripadvisor Inc (NASDAQ:TRIP), Vereit Inc (NYSE:VER), AMERCO (NASDAQ:UHAL), and Flex Ltd. (NASDAQ:FLEX). This group of stocks' market caps are similar to TSU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRIP,26,1449961,0 VER,22,491655,-3 UHAL,8,409239,0 FLEX,26,935426,-4 Average,20.5,821570,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $822 million. That figure was $266 million in TSU's case. Tripadvisor Inc (NASDAQ:TRIP) is the most popular stock in this table. On the other hand AMERCO (NASDAQ:UHAL) is the least popular one with only 8 bullish hedge fund positions. TIM Participacoes SA (NYSE:TSU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard TRIP might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.